Home Improvements: Will I get my Investment Back?
On a fairly regular basis I will get a call or email inquiry in regards to home
improvements. It is generally from someone not moving now but knows they will
have to at some point and they are trying to figure out where their home
improvement money is best spent.
Usually the asker is thinking about improvements to their kitchen, bath,
basement, or an addition.
And, the question is cut & dry – Will I get my money back out if I need to sell.
But the answer is not as cut and dry as people want to hear. They WANT me to
tell them, yeah – sure, no problem. But chances are good at this point that I
am the one they will call when they sell and I want to be sure that…
…I have given good advice
…they aren’t upside down in improvements
…they know what to expect
If you are wondering the same type of thing – you need to consider many things
and I even ask some questions to make sure you are thinking of the full picture.
I have learned throughout the years that many times when I get these calls the
homeowner already knows he is going to be moving at some point and he wants to
make sure his house is sell-able and competitive.
Do you think you will be moving in the next two years?
If the homeowner already knows they are moving, they may want to make big
improvements that are not really necessary. Its one thing to replace worn out
old & stained carpet. That would be a good investment. It will help sell
your home overall. Will you get every penny back? Probably not every -
buyers just plain old expect to have decent carpet in a home.
But here’s another scenario – rip out a perfect good kitchen just to have
granite counters, new floors and shiny new appliances. Sometimes worth it,
sometimes, not. Read on….
Why do you want to make the improvements? Are they purely cosmetic or do
things need to be done….
I truly believe that there is a value that you can place on the enjoyment of
your added improvements. And I think its very important for homeowners to
understand this. Many don’t. Some think a dollar spent is a dollar coming
back at them. Often when a homeowner feels that they should ask more for
their home because they finished the basement, or whatever…I will as them if
they would have done that if they knew they were going to sell soon. Almost
all reply with a no. Then I ask why? They say because I won’t get my money
back. It seems that they have answered the question themselves about pricing
it to recoup the money. Back to the granite in the kitchen above. Or this
could even be about finishing a basement. If you are going to spend $30,000
to finish your basement, you probably are not going to be able to get $30,000
more for your home. If you are going to be in your home for 1 year, will that
difference be worth it to you. How about in 3 years? Or 5? Chances are, if
people know they are leaving soon, they will not make a huge cosmetic
enhancement once they really think this through. When they know they will be
staying in their home 3+ years, they will begin to see that there is a type of
non-monetary value in enjoying their new improvements, and they are more
accepting of what their return will be.
You are thinking about adding granite to the kitchen kitchen and stone floors
and plan to be in the house 3 – 5 years. Perhaps you think its worth the
investment when they consider time added value. Now you ask more specifically
- how much value can I add and not overprice myself out of my neighborhood?
You talk more, and they are directly inquiring about the project itself. The
nitty gritties. That is being smart. You need to sure your home is still
sell-able. I would discuss such things as the percentage of homes in his
neighborhood that have sold in the last few months and what is in them. Slab
vs tile granite. Stone vs hardwood floors. Black appliances vs all stainless
steel. Its always nice to have the nicest home on the block. Sure can be
nice to live in. But it isn’t always the easiest one to sell when it comes
time to. Especially if you think you are going to get all of your monetary
investment back. It is very important that homeowners understand the risk of
making their home too nice and pricing themselves out of their own
neighborhood.
But with that said, currently in the Denver area, re-coup of kitchen remodels
is very high – between 75 – 80%. This is definitely one of the top areas that
you can add a lot of value and really enjoy great enhancements. I can not say
this enough though, upgrades to your kitchen do far more than effect the value
of your home – they can dramatically enhance the overall appeal of you home.
The kitchen is often the soul of a home. I have seen kitchens make or break
deals, many times. This is also an area I would recommend that you consult
with a decorator or home improvement professional for planning purposes, even
if you are going to do the work yourself.
Especially in this changing market, homes that do have great improvements will
sell faster than homes needing major improvements. If there are 50 homes on
the market, all equally nice and 10 have a finished basement – those 10 are
most likely going to sell faster – as long as you listen to your agent and
still price it correctly. Again, this may mean not getting every penny back
on the investment of enhancements.
Back to paint and let’s add carpet to the mix. Before considering larger
jobs, don’t forget or underestimate the value of paint and carpet. Both are
amazing at adding value and can dramatically changing a home. Investors have
been aware of these two gems forever!
Outdoor improvements – Building a Deck or Patio: In Colorado we spend so much
time outdoors that a deck or patio is almost a necessity. The question is
deck, patio or either at all? Both can be very beautiful and always make a
great addition to the home. Sometimes you may not have a choice as is the
case with walk out basements. Decks may require more maintenance but for many
they are preferred. Resale value of a deck or patio is around 75% – 80%.
However, living without one may not be as enjoyable.
Roofs: Do you need a new roof? Is the roof damaged? Of course, the home’s
roof is critical. If your roof has been damaged check with your insurance
company to see if a claim can repair of replace the roof or its damaged areas.
If the roof is older or just seems worn out then you may want to look into
replacement. If you are trying to sell, I’m sure that the buyer will have an
inspection that will discover this anyway. Roof replacement can be costly and
will return around 67%, however roof leaks can cause much bigger problems.
Windows: Windows don’t have to be very old before needing repair of
replacement. If your windows are damaged or no longer efficient then
replacement may be a consideration. If the windows are newer and failing,
have a professional window contractor out to determine the cause and recommend
the next step. Sometimes the windows may be under warranty or at times, a
class action law suit that may help with replacement. Window replacement can
also be costly and will return around 80%.
Bathroom remodel: Are your bathrooms too small or outdated? Maybe you just
need one more. In any case, bathrooms can also be costly but worth the
investment. Most bathroom remodel jobs should return around 70% – 75 %
Pop-Tops are still very popular in parts of Denver. Where they can’t expand
out, they expand up. Pop-tops can increase living space enormously and will
continue to be an attractive option for those that need to increase space but
wish to remain in Denver.
In the end the decision is yours but I enjoy providing valuable food for
thought. While I do want you to improve your house if its the right decision
for you, I want you to do it smart. I want you to love your improvements. I
want you to be happy with what you decide to do. When it comes time to sell,
price your home correctly, get a good return but fair on your investment. You
don’t want to be in a position that you think you can overprice your home and
get your money back. Over-priced homes do not sell, no matter how nice they
are.
Recoup statistics used in this blog can be found here and are based on the Rocky
Mountain Region.
So here we are on Labor Day Weekend. And I can tell you without hesitation – The question of the summer that I received – whether it was at a backyard barbecue, in the church parking lot, at a soccer game, at the pool, in an email or on the phone – was…
